In the latest move in the game to transform higher education in India, the Commerce Ministry has put out a consultation paper aimed at building support for an Indian offer on education in the negotiations under the General Agreement on Trade in Services (GATS). The paper, while inviting opinions on a host of issues, is clearly inclined to offering foreign educational providers significant concessions that would facilitate their participation in Indian education. In its view: ''Given that India's public spending, GER (gross enrolment ratio) levels and private sector participation are low, even when compared to developing countries, there appears to be a case for improving the effectiveness of public spending and increasing the participation of private players, both domestic and foreign.''

Public spending—central and state—on higher education has indeed been low, amounting to less than half a percent of GDP over the last two decades, even though the government itself targets a spending rate of 1.5 per cent of GDP. If, besides private sector participation, public spending and enrolment are low, the emphasis must clearly be on increasing these with more allocations to education. This is likely to be extremely effective since India has the requisite institutional framework. With around 350 universities and more than 17,000 colleges, institutionally speaking India has one of the largest higher education systems in the world. The problem is that the average enrolment in Indian higher education institutions is anywhere between one-fifth and one-twentieth that in many other countries. This would mean that if public spending could be raised to improve the infrastructure, quantity and quality of personnel, and student intake, quick progress can be made. However, by taking the availability of public resources as given, the emphasis is being shifted to increasing the effectiveness of public spending rather than its quantum, and supporting it with higher user charges and a larger private presence.

The arguments advanced are tiresomely familiar. The availability of higher education is seen as woefully short of demand and need. This is attributed to the fact that public expenditure is (and would remain) inadequate and ineffective, and private provision is constrained. The affiliating college system, which is an ingenious way of combining decentralised management and competition in a mammoth educational apparatus with central control over the substance and quality of education, is presented as chaotic. The substance of education is seen as irrelevant in the sense that it does not train students for the job market, whose needs are seen as being easily characterised. And all of these inadequacies, it is presumed, can be substantially addressed with greater private presence, especially foreign presence.

As always the case with the behaviour of the votaries of accelerated liberalisation, the fuss over this issue is unclear. Foreign educational providers are permitted to enter and have entered India, even if not in large measure. India permits 100 per cent equity holding for foreign direct investors under the automatic route in the educational services area. It therefore allows for commercial provision of educational services by foreigners and the repatriation of surpluses or ''profits'' earned through such activity.

What then is not permitted currently? To start with, no educational service provider if recognised as a university by the University Grants Commission (UGC) or is offered recognition by organisations like the All India Council on Technical Education (AICTE) can operate on a ''for-profit'' basis. Surpluses can be generated based on fees charged, but those surpluses will have to be ploughed back into the institution.

Moreover, obtaining and adopting the nomenclature ''university'' in India has its regulatory implications. Section 2(f) of the UGC Act 1956 defines a University to mean an institution established or incorporated by or under a Central Act, a Provincial Act or a State Act. Going by this section, for an institution to identify itself as a university in India, it would have to be set up by a central or provincial legislative Act.

There is one other route to university status. Based on the recommendations of the Radhakrishnan Commission, a provision was included under section 3 in the University Grants Commission Act of 1956 that institutions which have unique and distinct character of their own could be deemed to be a university and enjoy the concomitant privileges without losing their distinctive character. Originally, this option was to be exercised only in the case of "institutions which for historical reasons or for any other circumstances are not universities, yet are doing work of high standard in specialised academic fields comparable to a university and the granting of the status of university would enable them to further contribute to the cause of higher education which would mutually enrich the institution and the university system." In the 35 years between 1956 and 1990, only 29 institutions were granted the deemed university status.

However, the provision has been put to use more often in recent times, with even private institutions being deemed as universities. Further, since 2000, deemed university status has been granted even to de novo institutions. In the 15 years after 1990, 63 institutions were declared deemed universities. More recently, over the period 2000 to 2005, 26 institutions have been notified as deemed universities. Many of these are institutions which provide undergraduate education or training of a vocational kind.

What is more, certain state governments have been liberal in encouraging the establishment of private ''universities''. In Chattisgarh, the Chhattisgarh Niji Kshetra Vishwavidyalaya (Sthapana Aur Viniyam) Adhiniyam, 2002 allowed the state government to establish a university through a mere notification in the state official gazette. As a result, more than 100 private universities were established in Chhattisgarh alone through a single umbrella act, which has since been challenged with adverse implications for the student body in some of these ''universities''.

While foreign providers can use these routes to obtain university status, there are two implications they would have to take into account. First, since a University has either to be established by an Act or be deemed to be a University by the University Grants Commission, they would be subject to the regulatory system for formal ''universities'' as it evolves through interventions by the executive and the judiciary. There cannot be a framework which applies to foreign universities, which is any less regulatory or more open than what applies to domestic private universities.

Moreover, the fundamental objective driving foreign entry may be undermined by this environment. Foreign universities and higher education establishments are unlikely to enter the country and establish a long-term, sustainable presence for purely altruistic reasons. In their search for profit and its repatriation, they are bound to make a case under the ongoing GATS negotiations to permit the easier entry of commercial educational providers with repatriation rights. This could result in a conflict between the decision to permit entry by foreign educational service providers and the terms of such entry, on the one hand, and the current understanding of the role institutions of higher education should play.

India has always maintained that higher education is an obligation and duty of the state that must be substantially financed by the exchequer and that commercialisation and profiteering are not legitimate goals of Universities. B.N. Kirpal, C.J.I. in delivering the judgment in the TMA Pai case on behalf of the majority, states, inter alia, that: ''…Article 19(1)(g) employs four expressions, viz., profession, occupation, trade and business. Their fields may overlap, but each of them does have a content of its own. Education is per se regarded as an activity that is charitable in nature [See The State of Bombay v. R.M.D. Chamarbaugwala (1957) SCR 874: AIR (1957) SC 699]. Education has so far not been regarded as a trade or business where profit is the motive.'' There are instances of substantial fees being charged from students but these are justified in terms of covering costs and building infrastructure with no element of profit making.

Since universities in India, including private universities cannot function as commercial establishments, it should be obvious that foreign educational service providers cannot be allowed to function as profit-making enterprises with the right to repatriate surpluses to their parent institution. If foreign providers are willing to adopt charitable status and be subject to the domestic regulatory frame there case can be considered on the same principles that apply to domestic private providers. But given its commercial implications, India cannot make any commitment with regard to education under GATS, without rethinking the principles it has held and continues to hold on the educational front.

Does this mean that foreign players would be unwilling to enter the higher educational area? It does not. What they may do (and are doing) is establish a presence in the form of private commercial providers of educational services who are not officially recognised by the government. There are a number of institutions in the country, both domestic and foreign, currently operating in this form. Those which are successful are the ones that are seen as providing a training that is recognised by employers, as reflected in the proportion of outgoing students who get placed and the salaries at which such placement occurs. Since those arguing for privatisation of education are most often also those who argue for greater ''commercial relevance'' of education, this should be a completely acceptable form of ensuring both competition and quality in the market for private educational services. What needs to be noted is that India does not have to make any additional commitments to provide foreign players the opportunity to offer these kinds of services.

The case for special concessions under GATS arises, therefore, only if the government wants a foreign presence that goes beyond what is detailed above. There are two grounds on which such an extension of the area of freedom for foreign players has been defended. The first is foreign investment in education is seen as necessary, in order to supplement the inadequate amounts currently being spent by ostensibly resource-starved governments on higher education in the country. This is seen as crucial to meeting the excess demand for good higher education in the country. The second is the argument that the best foreign players would not come in adequate measure if they are not accorded the status provided to all public and many private educational providers in India. This is seen as unfair to those who are willing to pay for such an education. It is also seen as foreclosing a much needed contribution by foreign providers, even if at high cost.

The point regarding inadequacy of resources, is if anything weak. It ignores the possibility of substantially increasing resources in the hands of the state, by raising India's relatively low tax-GDP ratio, for example. And it overlooks the possibility of reallocating resources from what many consider less essential areas to a priority area like education.

The second argument, which is more material, is the view that there is a demand from resident Indians for education of the kind offered in universities abroad, but is currently accessible only to those who obtain the necessary funding or have the requisite own resources to travel abroad to access such education at relatively high cost. Increasing access to such education through means other than consumption abroad is seen as a democratic project. Needless to say, this presumes that the kind of education being offered on Indian soil by foreign educational providers is equivalent in quality and certification to that which can be accessed abroad—even though this is not necessarily the case. In fact, there could be misuse of a foreign brand to purvey relatively poor quality education at high cost.

Moreover, the reason why such educational access is being demanded needs to be addressed. It is indeed true that the National Science Foundation of the US reported (in its publication Science and Engineering Indicators 2006) that more than 63,000 of the 279,000 foreign graduate students enrolled in US universities in 2004 were Indians. But it also pointed to the fact that of the 3,238 Indian recipients of science and engineering doctorates in the US in 2003, nearly 90 per cent planned to stay on in that country, with two-thirds having definite plans to stay.

If the demand for a foreign education is because such a degree is necessary to access jobs outside the country, then provision of such degrees need not be a priority for the government. If, on the other hand, such access is demanded because the quality of domestically provided higher education is not adequate in terms of availability or quality, then the case is for redressing that inadequacy, rather than adopting a policy that may in fact further weaken domestic education. No one can deny that there are enough instances of institutions of higher education that are considered comparable to the best internationally in the country.

Moreover, some degree of access to top-quality international educational resources is possible through collaboration agreements between domestic and foreign universities, which allow Indian students to benefit from the faculty, the courses and even the ''brand'' of the better foreign universities, just as students from those universities can access the best Indian expertise. In sum, while considering demands from more well-to-do sections in the country for domestic access to the services of foreign educational providers, the government needs to assess the private and social benefits of acceding to this demand after taking into account the social costs that such a policy may entail.

When confronted with these arguments, it is often held that India should permit foreign educational providers to enter into the country in order to obtain reciprocal and equal rights in those countries for Indian universities. There is a growing recognition of the teaching strengths of sections of the Indian higher education system. This could mean that in the evolving ''knowledge economy'' India may have advantages as an international educational service provider, that can help absorb some of the educated unemployed into this activity as well as serve to earn the country valuable foreign exchange. For this reason, it is argued, India should not shut itself to the international provision of educational services through cross-border supply or through the establishment of a commercial presence, supported with the movement of natural persons.

It hardly bears stating that India's priority today is not that of becoming an exporter of educational services, but of ensuring good quality higher education for its young citizens. Making a commitment under GATS could tie the hands of the government and prevent it from adopting a nuanced policy that can serve that objective. So, as in the past, it should abjure from making any such commitment. We need to look elsewhere to generate an export thrust.